State Comptrollers Report Confirms Need for Major Reforms Already Underway at SUNY Research Foundation.

October 22, 2012

Albany – State University of New York Chancellor Nancy L. Zimpher today received the final version of a report from the Office of the New York State Comptroller on “Selected Human Resource Controls and Potential Conflicts of Interest” at The Research Foundation for SUNY (“RF”), following a broad and comprehensive internal and external review of the RF initiated by SUNY leadership that began in August 2010.

“Over the last two years SUNY leadership has overseen the most comprehensive review in the history of The Research Foundation, and as a result it is a markedly improved organization,” said Chancellor Zimpher. “From the beginning, SUNY and RF leadership have viewed the audit as an opportunity to acknowledge past problems and pledged full cooperation. The comptroller’s findings are confirmation that change was necessary. The RF is moving forward under the new leadership of Dr. Timothy Killeen, a world-renowned scholar and former National Science Foundation assistant director. The RF will continue to help capitalize on SUNY’s role as a major driver in building the state’s innovation economy and expanding research for the benefit of all New Yorkers.”

“The SUNY Board has full confidence in the reforms Chancellor Zimpher has already put in place at the RF and in Dr. Killeen’s leadership,” said SUNY Board of Trustees Chairman H. Carl McCall. “As a former state comptroller, I appreciate the critical role this OSC report plays together with SUNY’s already rigorous reforms to ensure that New Yorkers have a high-functioning research powerhouse to drive our economy into the future.”

Under Chancellor Zimpher’s leadership, the RF has implemented an extensive control environment and new policies and procedures to help safeguard its nearly $1 billion in research activity that it processes annually. The RF has:

  • Instituted new protocols that raise the standards of accountability of officers and employees alike, and set clear expectations of ethical behavior;
  • Reviewed its policies and procedures relating to procurement, contractual and transactional work across the operation;
  • Strengthened its governance and attracted new members to its Board of Directors, each of who brings different and diverse skill sets and valuable expertise to the table, and;
  • Reinforced its institutional commitment to the highest standards of integrity and ethical behavior.

“We appreciate the thorough review and recommendations from OSC as SUNY and the RF strive to set a national model for research foundations across the country,” said recently appointed RF president and former National Science Foundation assistant director, Dr. Timothy Killeen. “I am committed to ensuring that the New RF exceeds all expectations of accountability and integrity, and look forward to cementing the RF as an organization intensely committed to its roots – enabling and developing the research potential of our state’s great public university system.”

Several points highlighted in the OSC report have already been addressed by Chancellor Zimpher and Dr. Killeen throughout this multi-year reform effort. These include:

  • The re-focused use of the so-called “Chancellor’s Account.” This account was appropriately renamed as the "Strategic Plan Allocation" to support system-wide initiatives such as cradle-to-career partnerships, educational conferences, student and faculty achievement awards, and the release of SUNY's annual report card. As is commonplace at any college or university, SUNY hosts events to engage stakeholders and supporters that may include food and beverage expenses. As we stated in our official response to the draft audit, the expenditures were for legitimate SUNY business, and are reasonable and appropriate. The club membership identified as being paid from this account was cancelled voluntarily by the Chancellor in December 2010 before the OSC audit even began and, in fact, OSC itself removed allegations of funds being used for items “personal in nature” from their final report.
  • The continuous review and improvement of the RF control environment to ensure compliance with applicable law and policy. The RF has implemented extensive controls and continuously updates and improves its policies and procedures, including those related to procurement and payroll, to ensure compliance. Recently, the RF recruited new management and board members and enhanced board governance. Further, a new Code of Conduct was issued, policies have gone under review, and a new compliance oversight function has been created. In addition, an Internal Audit team has been developed and is executing a risk-based audit plan, a best practice for concentrating audit activity in high risk areas.
  • Ensuring open competition takes place in procuring contracts, and a reasonable price is paid.The RF acknowledges that documentation supporting the issuance of these contracts was, at times, insufficiently detailed and untimely; however, no actual conflicts of interest existed relative to the identified contracts. The vendors hired had the experience and expertise required, reasonable prices were paid, and the contracts were necessary. The RF is taking steps to ensure that any future single or sole source justification is properly documented. In particular, the Honorable Judith Kaye, Retired Chief Judge of the New York Court of Appeals, was retained as counsel at Skadden, Arps, Slate, Meagher, & Flom LLP in New York City by the Executive Committee of the SUNY Board of Trustees to conduct a review and analysis of the Men’s Basketball program at Binghamton University. The single-source contract awarded was not for legal representation of the SUNY Board of Trustees, and therefore could not have fallen under the auspices of the State Attorney General as OSC recommends. 
  • Termination of the operations manager for the Research Foundation at Buffalo State College.The RF agrees that policy was violated. RF management conducted an in-depth independent review of the referenced activities and took swift and appropriate action including termination from employment and referral to law enforcement. The RF also implemented new controls to help protect against misuse of funds, including fundamental changes in reporting and management and training of Operations Managers.

In May 2011 a SUNY-commissioned report entitled “Review of The Research Foundation-SUNY Relationship” was released, and the following month SUNY charged two task forces – one comprised of members of the RF Board of Directors and the other of members of the SUNY Board of Trustees – to advise their respective boards on how to address over 50 recommendations with the goal of strengthening the RF’s ability to fulfill its mission to serve SUNY.  

In November 2011 a Summary Report of the SUNY Board of Trustees and Research Foundation Board of Directors Task Forces’ Joint Review of the SUNY-RF Relationship was released. That review and the audit validate the critical role the RF plays in supporting essential research throughout the state. 

As a private non-profit educational corporation, the RF administers nearly $1 billion in SUNY research activity annually, providing sponsored programs administration and commercialization support services to SUNY faculty, students and staff who are making ground-breaking discoveries every day in the areas of nanotechnology, biotechnology, materials science, high speed computing and other fields.

The OSC report covers an audit period of July 1, 2008, through January 31, 2012, and was prompted by specific concerns related to previous management and oversight of the RF. This audit was primarily focused on the management of indirect cost recovery funds, also known as facilities and administrative costs or “overhead,” costs allocated to the general operation of the organization and the conduct of its grant activities. The funds in question represent a limited portion of the RF’s overall operation when compared to the much larger direct costs associated with grants and contracts administered across SUNY’s state-operated campuses. As to these funds, and during the same period of review, the RF received independent audits by an external public accounting firm on its annual financial statements and its compliance with U.S. Office of Management and Budget Circular A-133. These audits validate the RF’s compliance and sound management of sponsored funds.

About the State University of New York
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